The complete DSCR loan guide: qualify on the rent, close in your LLC
Everything in the underwrite — the formula, the tiers, what moves your rate, and the six documents that actually matter.
A DSCR loan asks one question: does the property's rent cover its payment? If the answer is yes, you have a loan — without a tax return, W-2, or DTI worksheet anywhere in the file.
What a DSCR loan is
DSCR stands for debt service coverage ratio. Lenders in the space underwrite the property as a small business: its revenue is the rent, its debt service is the mortgage payment, and the ratio between them is the credit decision. Your personal income never enters the math — which is why these loans fit self-employed investors, portfolio builders past the conventional ten-loan cap, and anyone who'd rather not hand a lender three years of returns.
The trade: rates run roughly 0.5–2 points above owner-occupied conventional, and you'll put 20–25% down. For an asset that cash-flows, most investors take that trade every time.
The formula
At 1.00, the property exactly carries itself. At 1.25, there's a 25% cushion — and better pricing. Below 1.00, deals still get done at lower leverage or via a bridge loan while rents season, but the cleanest files start at 1.10+.
Rate tiers & what moves pricing
Three inputs set the tier: DSCR, LTV, and credit score. From there, adjustments move the rate in eighths — down for lower leverage or a longer prepay structure, up for cash-out, small multifamily, or interest-only payments. Our current tiers live on the rates page, adjustments included; the term sheet shows the math line by line.
The six documents that matter
A complete DSCR file is shorter than most people's vacation-rental listing:
- Lease (or STR revenue history / market-rent appraisal addendum)
- Entity docs — articles, operating agreement, EIN letter
- Two months of bank statements for down payment + reserves
- Insurance binder with the correct mortgagee clause
- Photo ID
- The appraisal — which we order, day one
Closing in an LLC
Title vests in the entity; members sign a guaranty. The loan reports on the business, not your personal credit, and your DTI stays untouched for the next primary-home move. Your CPA will ask whether the interest is deductible against the rental income — generally yes, as a business-purpose expense, but get that in writing from them, not from a lender's blog.
Five common mistakes
- Quoting rent optimistically. The appraiser's market-rent finding governs — pad your DSCR estimate, not your rent estimate.
- Forgetting taxes and insurance. P&I alone isn't PITIA; escrows sink more 1.05 files than rates do.
- Cash-out timing. Most programs want 3–6 months of seasoning before a cash-out appraisal uses the new value.
- Entity paperwork at the finish line. A missing operating-agreement page at day nine costs you the ten-day close.
- Shopping rate without shopping certainty. An eighth of a point is $31/month on $300K. A blown closing date is the whole deal.